Meese Did Not Follow Ethics Law In Blind Investment, Official Says

By CLIFFORD D. MAY, Special to the New York Times

Published: July 1, 1987

WASHINGTON, June 30—
Attorney General Edwin Meese 3d acted outside the law in investing $60,000 with a financial consultant linked to the Wedtech Corporation, the director of the Office of Government Ethics said in a letter released today.

The financial arrangement, which has been described by Mr. Meese as a ''blind'' limited partnership, did not meet the ''specific requirements'' of the Ethics in Government Act for blind trusts nor was it submitted for approval to the ethics office, according to the director, David H. Martin.

The statements were in a letter to Representative Gerry Sikorski, Democrat of Minnesota, who heads a House panel that oversees Government ethics and had asked Mr. Martin for information concerning the Attorney General's investments. Mr. Sikorski called the letter ''further evidence of a pattern of poor judgment and a frightful collapse of ethics within the Attorney General's office.'' He said he planned to hold Congressional hearings next month on Mr. Meese's investments and Government responses to it. No Criminal Penalties

Terry Eastland, a Justice Department spokesman, said that the Congressman's comments were irresponsible and that Mr. Meese had not broken the law.

The ethics act carries no criminal penalties, but officials who violate its provisions may face such administrative sanctions as dismissal or forced leave without pay. Since Mr. Meese is the head of the Justice Department, it is not clear who other than the President could order such sanctions.

Mr. Martin's letter said that the Office of Government Ethics is not inquiring into the matter, in deference to the special prosecutor appointed to investigate whether there were illegal conflicts of interest in Mr. Meese's links to Wedtech which is the focus of New York State, Federal and Congressional investigations.

He suggested that if the special prosecutor finds no illegality, the ethics office might look into the propriety of Mr. Meese's financial arrangements. Meese Urged Contract Award

In 1982, Mr. Meese intervened to help Wedtech, a Bronx military contractor, win a major contract. Three years later, he invested $60,000 with an investment consultant who he knew had ties to Wedtech. Mr. Meese has said, however, that it was a blind investment and that none of his money was to be used to buy Wedtech stock.

The issue addressed by Mr. Martin's letter is not whether the investments made by the partnership were improper, but whether the partnership met the requirements for blind trusts.

The purpose of a blind trust - an arrangement in which investments are made and administered without the knowledge of the investor - is to prevent the use of a public office for private profit.

The ethics act requires that blind trusts be scrutinized by the ethics office. These blind investments do not have to be listed individually in the financial disclosures required of government officials. 'Do-It-Yourself' Arrangement

Mr. Sikorski said in an interview today that under the law a blind trust can only be established in one way ''and that requires approval from the Office of Government Ethics, which the Attorney General did not have or even ask for.''

Mr. Meese, he said, ''just waved a magic wand and created a do-it-yourself blind trust. That should have been a big red flag for the Office of Government Ethics and the Justice Department. Instead, they pushed it away like last week's fish. That's not the kind of scrutiny we desire.''

Mr. Martin was said to be out of the office today, and Don Campbell, a spokesman for the ethics office, would not comment on Mr. Sikorski's interpretation of the letter.

Mr. Eastland, however, speaking for Mr. Meese, called Mr. Sikorski's comments ''a purely partisan political attack and irresponsible in the extreme.'' He said that Mr. Sikorski had misrepresented Mr. Martin's letter and that the Attorney General's actions ''in no way violated the law.''

The law in question, the Ethics in Government Act of 1978, was passed after the Watergate scandal and set up the Office of Government Ethics within the Office of Personnel Management. Its director is appointed by the President with Senate confirmation and can be removed by the President only for misconduct.

The office has responsibility for developing regulations, monitoring and investigating compliance by Government officials and recommending administrative sanctions where violations are found. Technically, Mr. Sikorski said, the office also has the power to order sanctions, but it has never done so.

Congressional critics of the office say that while the ethics office was intended to act as a watchdog agency for the executive branch, in recent years it has acted only as a consultant on legal ethics for the Administration.

Mr. Campbell, of the Office of Government Ethics, said it was ''possible'' that the Meese situation would also involve Executive Order 11222, popularly known as Standards of Conduct. That law, signed by President Johnson in 1965, states that Government officials are to avoid even the appearnce of a conflict of interest. Violations can lead to dismissal or suspension but here again, it is unclear who other than the President would have the authority to carry out such an order in the case of an Attorney General.

The man with whom Mr. Meese made his $60,000 investment is W. Franklyn Chinn, a consultant to Wedtech who later became a director of the corporation. Mr. Chinn is the target of Federal and State investigations in New York regarding his activities on behalf of the company. He has denied any wrongdoing.

Mr. Meese was introduced to Mr. Chinn by E. Robert Wallach, the same man who in 1982 lobbied Mr. Meese to assist Wedtech. Mr. Wallach has received more than $1 million in stock and fees from Wedtech.

Mr. Wallach is a San Francisco lawyer and longtime friend of Mr. Meese who was also named to two diplomatic posts at Mr. Meese's urging.

Four former Wedtech executives have pleaded guilty to charges of bribing as many as 20 Government officials. Separate state, Federal and Congressional investigations are looking into aspects of the Wedtech affair.